Applebee’s launches legal battle against its own franchise owner for control of Dayton-area restaurants

Applebee’s Grill & Bar’s corporate owners have filed a lawsuit to wrestle control of the brand’s restaurants in the Dayton area from its franchisee, in part because the franchisee has filed for bankruptcy protection.

The complex and high-stakes legal battle is in its early stages in the U.S. Bankruptcy Court in Delaware, but its ultimate impact will almost certainly be felt in the Dayton area. Applebee’s corporate owners have already identified in court papers one Dayton-area location — the Applebee’s at 1795 Delco Park Drive in Kettering — that would be forced to drop its affiliation to Applebee’s if a judge rules in favor of the chain’s corporate owners’ lawsuit.

RMH Franchise Holdings — the Atlanta-based restaurant franchise company that operates more than 150 Applebee’s locations in 15 states, including Ohio — filed for Chapter 11 re-organization bankruptcy May 8 in the federal bankruptcy court in Delaware, indicating it would continue operating while seeking relief from its debts. Those debts included $14.2 million owed to Applebee’s International Inc. for royalty fees and advertising costs, according to bankruptcy court records.

But Applebee’s corporate parent, Dine Brands Global, is challenging portions of its franchisee’s bankruptcy filing. In its own lawsuit filed three weeks after the initial bankruptcy court action, Dine Brands Global claimed that the restaurants operated by RMH Franchise Holdings should not be regarded as assets under RMH’s Chapter 11 bankruptcy filing because RMH had reneged on its franchise agreement. Dine Brands is asking a judge for a court order ruling that all of of the restaurants operated by RMH now essentially belong to Dine Brands.

Dine Brands Global claims in its lawsuit that RMH Franchise owes it a total of nearly $23.4 million in royalties and fees, and in future royalties and fees lost after RMH Franchise shut down some of the stores it operated.

RMH Franchise has not yet filed a formal response to the May 25 lawsuit. Messages sent to a spokeswoman for RMH Franchise Wednesday afternoon seeking comment had not been returned as of this morning, Thursday June 14.

Greg Flynn, Chairman and CEO of the Flynn group, the largest Applebee's franchisee, said in a a statement released by Dine Brands/Applebee’s that despite the dispute with RMH Franchise, the Applebee’s brand is doing well.

“It’s unfortunate that this particular franchisee has an issue, but at the same time, I’m very happy that Applebee’s is experiencing some of the best sales and traffic in a decade. A strong driver of our success has been our incredible collaboration and partnership among franchisees and Applebee’s leadership. I believe the future is very bright for Applebee’s.”

Court documents suggest the dispute between the Applebee’s corporate parent and its second-largest franchisee had been developing for at least a year. RMH Franchise “stopped paying royalties due under the franchise agreements” in June 2017, according to the lawsuit.

And according to FranchiseTimes.com, RMH Franchise suggested in documents related to its bankruptcy filing that Dine Brands was as least partly to blame for its financial difficulties, saying that “specific managerial decisions made on behalf of it by (Dine Brands) … have negatively impacted (our) business operations and left them facing near-term liquidity issues.” RMH had been making efforts to reduce operating expenses in part by “divesting themselves of certain under-performing locations,” RMH officials said in court documents.

RMH abruptly closed its Wilmington Pike restaurant in Sugarcreek Twp. on Saturday, June 9. Visitors to the restaurant that day were told the restaurant had shut down permanently, and they were given coupons for $10 off a meal at either of two nearby Applebee’s restaurants.

RMH has closed other Applebee’s in other states, including one on Tuesday, June 12 in South Bend, Indiana — that community’s second Applebee’s closure within a year, according to the South Bend Tribune.

Dine Brands Global says in its lawsuit that if a judge grants its request, it would assume control of the vast majority of RMH’s restaurants and continue operating them as Applebee’s. But it attached to its lawsuit a list of 20 RMH-operated restaurants it would NOT seek to take over, meaning those 20 restaurants would “need to immediately de-affiliate from using the Applebee’s” name and trademarks if the judge ruled in favor of Dine Brands, according to the lawsuit.

That list included three Ohio restaurants, one in the Toledo area, one on Colerain Avenue in Cincinnati, and the Delco Park Drive location in Kettering. That location was one of the two restaurants to which RMH Franchise officials referred customers of the Sugarcreek Twp. location when it shut down Saturday.

Other RMH-operated Applebee’s restaurants are located in Huber Heights, Xenia, Springboro, Springfield, Sidney, Mason, and on Ohio 741 near the Dayton Mall.

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